Car Insurance - Can You Save With A Higher Deductible?
I paid off the loan on my Civic a couple of years ago and did it a couple of years early. One of the benefits of doing this was I no longer had to have a lender mandated $500 deductible.
Instead I raised my deductible to $1000. The upside to this was that my premium dropped about $150 per year. The potential downside was that if there was a claim against my insurance (if I was at fault in an accident) my deductible would be $500 more. I figured if I could go 3+ years without a claim I'd be making money on this deal (and importantly I had some spare cash to cover the higher deductible).
A little while after I did this I was backing out of a parking garage. It was late, I was tired. I caught the edge of my front bumper on a concrete post. I heard a soft scraping noise. When I got out to look I saw what looked like half my car in pieces on the floor of the parking garage (mental note: they don't make cars like they used to).
The repair bill was about $1500. I didn't claim for it since doing so would jack up my premiums for years to come (and be the equivalent of borrowing money at an outrageous interest rate). I just paid it out of pocket. Even with a $500 deductible it wouldn't make much sense to claim.
Now that I think about it I'm not really sure I am coming out ahead with this deductible deal so far. However over the course of my remaining driving years as long as I'm reasonably safe I should make out pretty well with this - as should most folks.
-fg
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I actually think you made a good decision by increasing your deductible. If the situation is different, say you didn't increase the deductible, would you then claim the incident through your insurance company? Probably not, then the saving in the insurance premium is at least money you can use to "self-insured" situation like this.
Hi - It would be up to me whether I wanted to put it on my insurance or not (I actually started a claim just to find out what would be paid and how that would impact my premium - then I cancelled my claim).
I think you are right - I think insurance is really there to protect against big losses that could wipe out a big chunk of wealth. Over time I am confident I will come out ahead with the $1000 deductible.
